The IRS says I didn't report income that I reported 👀 😲😭💔

[progree]

Last edited Tue Nov 16, 2021, 09:02 AM - Edit history (2)

I'm slightly altering numbers for privacy and also using very round numbers ...

I also did my taxes that year using Turbo Tax (might be a factor)

Yesterday I got a CP2000 notice from the IRS claiming that I didn't report $10,000 in Beneficiary IRA RMD distributions for 2018 taxes, thus under-reporting my taxable income by $10,000. So I owe $2,900 in taxes due to that and some secondary effects that I won't bother to go into and including $190 in penalty interest.

Anyway they clearly enumerate the IRA RMD amounts from the 1099-R from Fidelity that they claim I didn't report.

Then they say my "Retirement income taxable" that I reported is $16,000 (true) but the correct figure, the IRS says, is $26,000, for a difference of $10,000.

I don't know why they didn't specify which line on my tax return had the problem, but "Retirement income taxable" fits 1040 Line 4b which has $16,000 on it. Line 4b is "IRAs, pensions, and annuities, taxable amount". So it all matches.

WELL, DAMMIT, EXCEPT THAT the $16,000 on my Line 4b INCLUDES the $10,000 in the Beneficiary IRA RMD distributions, as well as $6,000 in taxable annuity income. It's very specifically shown in some of the "Keep For Your Records" pages of the full tax return PDF file that TurboTax generated.

Now as what Turbo Tax sends to the IRS, who knows, but I'm pretty sure it's a lean version that doesn't show these "Keep For Your Records" pages.

Anyway, my question is, has anyone gotten a goofy IRS notice that some income or some other item was not reported, when it was?

And when one points out THEIR error, do they concede, or do they go full Trump?

I will be responding just by explaining that the $16,000 on 1040 Line 4b includes the $10,000 in Beneficiary IRA RMD distributions that they say I didn't report, plus the $6,000 in annuity income, and I will also send them the "Keep For Your Records" pages that enumerate both of these. (They want my response in writing, they don't say anything about responding by phone and saying "hey guys...", so I'll give it in writing).

I'll say if this isn't satisfactory, can you please enumerate why you think $26,000 is the right number for Line 4b? (Who knows, maybe Fidelity sent the 1099-R to the IRS twice).

I've read many reports that they are severely understaffed (Republicans want the IRS understaffed so they can cheat on their taxes, and so that their "hard-earned" money doesn't go to supporting "those people", i.e. the "multicultural types" ), but I haven't noticed this kind of carelessness from the IRS before.

I'll put it on my calendar to let you all know how it turns out, I suspect it'll be a month at least before I hear anything back.

Edited Feb. 5 to add: Got a snail mail response from them, received Feb 5, in essence, "Before we resolve this matter, we need to process all of your information. We'll send you our complete response within 90 days". See #17 below for more details.

Edited May 8 to add: Got a snail mail response from them, received Feb 5, in essence, "Before we resolve this matter, we need to process all of your information. We'll send you our complete response within 90 days".

Edited Nov 16 to add Got another response - IRS 8/2/21 letter received 8/3/21 - same as above

Got a letter 8/26/21 - "we're pleased to tell you that the information you provided resolved the tax issue in question and that our inquiry is now closed".

9 months is a long time to have a $2,900 tax bill plus ever-growing penalty hanging over one's head.

[PoindexterOglethorpe]

1. I can't offer anything about your specific problem,

but your thinking that Turbo Tax may not report everything to the IRS.

I have an accountant do my taxes, and recently he told me that the IRS gets statements from my investment accounts showing how much money was made in them this year. What they don't get is the full statement which shows all profit and losses. So if that's all they have, they will think I made a lot more money than I did.

I do hope you can get this resolved. Don't know if they are doing in-person audits these days, but that would be your best bet. And yes, they do concede when they are shown they are wrong.

[Cicada]

2. In your original did you include the identifying numbers of the payer?

If you entered $10,000 retirement income without saying who paid it, and their taxpayer Id#, then they will assume it came from an unknown payer. Then add to your income what is on their records from the real payer. Also if you are married and report the distribution as for you when it is really for your spouse they will add the income not reported for the correct spouse.

Send them a copy of the 1099r, a copy of your tax return showing where it was reported, and say you already reported that income.

[progree]

6. I believe what Turbo Tax sends is just the basics:

1040, Schedule 1, Schedule 5, Schedule A, B, D, and that's about it in my case.

In none of the above is any "list your retirement income" or "list your IRAs, annuities, and pension income". The only thing is a number on 1040 line 4a and line 4b. No breakdown of what's in either of these 2 lines.

TurboTax offers 3 options, I forget what they call them, as far as generating PDF files, but one is your tax return, the second is your tax return plus some additional worksheets and supplementary stuff (the "Keep For Your Records" stuff), and the third is the second one plus more more more more worksheets and supplementary stuff. I generate and store all three.

What TurboTax actually sends when I file electronically is very probably just what I've shown on the first line above "the basics".

When I prepared my taxes, the first thing I did was download all the 1099's from all sources into TurboTax. And then I check and make sure that every frickin number is included somewhere and check against a spreadsheet where I enumerate everything to make sure that AGI, taxable income, yada, are what they should be.

As for your specific question, yes, the 1099-R stuff in the "Keep For Your Records" stuff has all the info on my 1099-R's -- yes, both have the same "Payer's Federal identification number" and Fidelity's address and all that -- thanks much for the suggestion. I also carefully compared to what the IRA enumerated in their IRA CP2000 notice.

I'm 99% sure that it will be all OK when I send them the response I indicated in the OP (matching your suggestion, but yeah, I'll send them the original 1099-R's too as well as the applicable "Keep For Your Records" pages that TurboTax generated.

I'm single, so there's not the spouse complexity issue. 😊

[Yonnie3]

3. I've had a few rounds with the IRS

Not that similar to your letter, but here is one ...

I sent a letter back to the IRS saying I disagreed.
I then copied, enclosed everything and listed it all in the letter in a summation. I stated that this was all the income I had and offered to provide bank statements if required.
It took almost a year, but they sent me that refund check.

I think the issue was an employer sent two W-2's without marking the second corrected.

Since you used Turbotax aren't they supposed to assist?

[progree]

9. "Since you used Turbotax aren't they supposed to assist?"

It will just take me an hour to write and send my response to the IRS, so I don't think I need their assistance or that it will save me time. But if the IRS responds and still disagrees on this, yes, I'll contact TurboTax.

[drray23]

4. thats why its worth paying an accountant to do your taxes.

Hopefully you can get this resolved. Getting it in writing is a good idea. Especially given that you can send copies of your documents alongside.

[progree]

8. Yup, that's a long story of why I did my own taxes -- I check EVERYTHING on my tax return

(well all of the inputs) and found that it was costing me more time than I saved to do a back and forth with 2 or 3 drafts.

I had a tax accountant for 35 years until 2018. I've gone over this in many postings in the past.

In the past (even when I had the accountant) I've gotten notices from the IRS and always dealt with them myself, and it was easiest that way, so that's why I did it. Except in a couple of circumstances when I needed his help. The other times I just looked into it and responded and it was all OK, but that was many years ago before the RepubliCONS shredded the IRS.

[CaptainTruth]

5. I recommend contacting an IRS Taxpayer Advocate.

The IRS has info on Taxpayer Advocates on their irs.gov web site.

I had a disagreement with the IRS years ago, a disputed dollar amount, I gave all my documentation to a Taxpayer Advocate & they dealt with the IRS & got it resolved.

Good luck!!!

[alwaysinasnit]

7. I second that!

[progree]

10. Thanks, I'll put that in my list of what to do next if I don't get a favorable response /nt

[Karadeniz]

11. So good to hear the IRS is going after the big bucks and habitual tax evaders... This will probably

Erase the national debt!

[choie]

14. That's what I was just thinking..

How about sending the letter back with a post script - “why don’t you make trump pay all the taxes HE owes and lay off the small fry!”

[pnwest]

12. Go to H&R Block and have them help

you respond. It’ll be worth the money for their expertise.

[PSPS]

13. Every IRS agent I've ever dealt with has been great

Just explain what you did. Those letters often have the agent's direct phone and email address where you can also contact them. You shouldn't have any problem. They are really very friendly and willing to help you.

[progree]

15. I've had very good response too

1. Once I forgot to give my tax guy my Fidelity 1099 stuff. When I found the damn thing a year later (in the wrong folder) I wrote the IRS. About a month later I got an IRS notice about it. Anyway I wrote that I hope I could avoid some certain large penalty, given that I initiated the contact letting them know of the error. Fixed, no penalty beyond the interest charges. And of course I had to pay the additional tax on the additional income

2. My elderly Dad in his last 2 years neglected to take his IRA RMD distributions. There's a 50% penalty for failure to take required RMD distributions, meaning for example if he was supposed to take $10,000 RMD distribution and didn't take any, then he has to take the distribution and pay the resulting tax on the increase in taxable income, PLUS 50% of $10,000 = $5,000 penalty.

My sister and I wrote a long record about how medically on the edge he was in the last 2 years with all his ailments and tons of prescriptions -- result: penalty waived

3. Something about some interest on an H Bond IIRC but might have been something else. Anyway I had a phone conversations with an IRS agent who very patiently and expertly explained the whole thing.

4. Back when I was on the ACA (Affordable Care Act, Obamacare), they complained that the estimated income (AGI) that I had used to get the ACA subsidies was far below what was subsequently reported to the IRS (they actually expect you to guess your income nearly 2 years in advance, sigh).

I explained in an overly long letter (that was probably unnecessary in all its excruciating detail) that actually my estimate of my AGI was quite accurate -- listing about 7 different sources of income -- EXCEPT for one thing -- I took a large Roth conversion at the end of the year that I had not anticipated doing when I made the estimate (Roth conversions add to one's AGI and taxable income). I never heard back 😊

I can't think of any encounter I've had with the IRS that was unfair or the person was a jerk or anything like that.

Those letters often have the agent's direct phone and email address where you can also contact them. You shouldn't have any problem. They are really very friendly and willing to help you.

Not this one, but I'd expect that in their response to my upcoming response, given that a human IRS agent, and not a bezerko computer, looked at it.

[PSPS]

16. I had an audit once. The agent gave me her phone number and email.

I called her, exchanged some emails, invited her over to examine my paperwork. She came over on time, went through my papers, entering various things on her laptop, thanked me and left. All very friendly. The result was the cherished "no-change audit!"

[progree]

17. I got a response - first time I've heard back. "We need to process all of your info..."

Received a snail mail response on 2/5/21, the first time I heard from them.

"We received your reply on Nov. 20, 2020 to our notice about proposed changes to some of the items on your tax return. Before we resolve this matter, we need to process all of your information. We'll send you our complete response within 90 days. If you think you might owe any additional tax, you should consider paying it now. The law requires us to charge interest on unpaid tax from the due date of the return (not including any extension of time to file the return) to the date you pay the tax in full. If you have questions about this matter, you can call office of [some real person's name] at [phone number] between 7:00 AM and 8:00 PM MST". If you prefer, you can write to us at the address at the top of the first page of this letter. [Blah blah blah] Thank you for your cooperation"

Emphasis added by Progree

((Prior: 11/12/20 - received IRS Notice CP2000 11/12/20 dated 11/9 for 2018 Taxes that I owe $2,923. They claim I didn't report my BDA IRA RMDs but I did. -- I mailed my full blown response with many pages from my return and TurboTax "keep for your record" pages too on November 16. Given that they said they received it on November 20, at least my letter got delivered in a timely way ))

[progree]

18. Finally, they folded 9 months later

I promised I'd let people know the outcome. 9 months is a long time to have this hanging over one's head,

# 11/12/20 - I got the CP2000 claiming that I didn't report $10,000 in Beneficiary IRA RMD distributions for 2018 taxes, thus under-reporting my taxable income by $10,000. So I owe $2,900 in taxes due to that and some secondary effects that I won't bother to go into and including $190 in penalty interest. (see OP for details)

# 11/16/20 - I mailed my response to the IRS CP2000

# 2/5/21 - Got a response -- the first time I heard from them -- "We received your reply on Nov. 20, 2020 to our notice about proposed changes to some of the items on your tax return. Before we resolve this matter, we need to process all of your information. We'll send you our complete response within 90 days."

# 5/8/21 - Got another response - IRS 5/3/21 letter received 5/8/21 - "Before we can resolve this matter, we need to process all of your information. We'll send you our complete response within 90 days.

# 8/3/21 - Got another response - IRS 8/2/21 letter received 8/3/21 - same as above

# 8/26/21 - Got a letter, "we're pleased to tell you that the information you provided resolved the tax issue in question and that our inquiry is now closed".

[FireUpChips10]

19. Thank goodness!

[question everything]

20. The IRS desperately needs more agents. I think that the recent bill calls for more to look for tax

evaders but, really, it needs more agent to answer tax payers responses.

I remember years back - 8, 10? when off season I would spend about 30-40 minutes chatting with an agent.

Something to add to my future communication with my representative.

[progree]

21. Yes, I am So-o-o-o-o-o-o glad I didn't have to talk to someone ...

I'd probably get someone who had a quota of about 5 minutes to get me off the phone and was expected to "win" 7/8 of the time.

[A HERETIC I AM]

22. HEY! Where you been?!?

Thought something might have happened to you! I'm glad to see you're still with us!

Or you have just been posting elsewhere!


Had me worried, old hand!

question everything was wondering as well.

[progree]

23. I was getting far behind on personal and household projects that I took a break

from July 31 to November 5, so a bit more than 3 months. Unfortunately it doesn't seem like I got caught up very much, but did a number of little things that wouldn't have gotten done otherwise.

I much appreciate you and q e noticed! Thanks. q e "caught" me posting a few days ago.

[A HERETIC I AM]

24. I get it. Sometimes life gets in the way!

Well, glad you're OK.